An understandable cocktail of euphoria, rhetoric, and hope has shaped the birth of the Asian Infrastructure Investment Bank (AIIB). The October 24 ceremony in Beijing took on the solemnity that an agreement between 21 counties saves for an epochal occasion. The marking was affixed—among all—by China, the 10 ASEAN countries (among which Indonesia and Singapore stand out), the countries of the Subcontinent (therefore including India, Pakistan, and Bangladesh), and Kazakhstan and Uzbekistan, the two most important countries in Central Asia. The initiative was Chinese, but adhesion was horizontal between countries, and put historic rivalries aside. The necessity of development seems to have prevailed. Infrastructure is vitally important to support economic growth in a globalized world that reduces the value of borders and opens doors to production and consumption anywhere they’re available. Everyone shares this view; governments and analysts cannot criticize it. In any case, it clashes with political and economic restrictions. Who is financing the work, reaping the benefits, and who is controlling exchanges? Until now, the answer to these questions started and ended in Washington after a more technical than political layover in Tokyo. In any case, the answer seems insufficient. If the cost of a railway between Kunming (in Yunnan, a province in Southern China) and Vientiane (the capital of Laos) costs $6 billion (almost equal to Laos’ GDP), who should finance the construction of the railway, essential of the modernization of the country? Until a few years ago, Laos’ hopes would have been refused or submitted to a dipole of addresses: the World Bank (WB) in Washington and the Asian Development Bank (ADB) in Manila. The desire to escape underdevelopment would have been subjected to review by the two institutions, where the US and Europe control one (WB), and the US and Japan control the other (ADB). Development is therefore subordinate to political parameters, for which the reference to World War II’s Pax Americana still prevails. However, there are at least three contradictions in the financing mechanism. The first is the urgent need for development. Backward Asian nations cannot—and more importantly do not want to—wait any longer; they’re not looking for handouts to trickle into their registers. Many examples of success have demonstrated that growth is not a mirage or granted only to others. Secondly, the WB and ADB are besieged by expanding requests, which are not in proportion to their available budgets. Selection and postponement are routine. In the end, the unpreparedness of the two institutions is striking considering the tasks they need to resolve—a well-known and painful topic. Over the years they have transformed into conservative temples, afflicted by embarrassing elephantiasis, notably slow decision-making, and impressively high salaries for its officers. I worked for these institutions for a long time: I know their mechanisms well and the logical categories that lead to certain conclusions. I will always remember Beniamino Andreatta’s wise maxim: “multilateral institutions should have an expiration date, their longevity should be in proportion to the scope for which they were born, otherwise they’ll transform into paradises for their own bureaucracy.”

In this framework, the birth of an alternative bank was part of the natural order of things. The new bank’s endowment will be $100 billion, a good part provided by China. Therefore, it involves much less funds with respect to other international banks, but it’s certainly capable of determining hopes and fears. The former belong to Asian countries, the latter to the Nippon-American status quo. Not by chance, Washington expressed a negative opinion regarding the new bank. Furthermore, it exercised the usual diplomatic pressures to convince the friendly governments of Tokyo, Seoul, and Canberra not to join. It’s undeniable that Japan, South Korea, and Australia do not need infrastructure, just like their fear that China will be rewarded politically in the restructuring of equilibriums in the Pacific Ocean. In Africa, China demonstrated a capacity—until now controversial but effective—to help local governments build infrastructure, obtaining political twinning and raw materials in exchange. China is the only country in the world capable of transferring machinery, capital, and a workforce simultaneously. And now it intends to do so in Asia, relying on many factors: acquired technology, geographic proximity, the allocation of resources, and the creation of markets for their goods. China has an enormous population, the vastest network in the world, and $4 trillion in its safes. Therefore, it possesses all the ingredients for a collaborative recipe, to plant trees it can then shake for fruit. According to the latest words of President Xi Jin Ping, the seeds will also land in Europe. New funds will finance the New Silk Road. Across its bifurcations—one terrestrial, the other maritime—new routes will cross and connect 60 countries in Eurasia, repudiating territorial and cultural boundaries.

Washington’s opposition appears timid and incoherent with respect to the project’s titanic range. Calling for transparent decision-making will not prevent the plans: loads of iron and cement will not be stopped by asking that the environment be respected; construction sites won’t be blocked by recalling labor violations. It’s necessary to put one’s house in order and recognize that this time—at least in principle—China is undertaking an operation that has been requested repeatedly. The West has always hoped that it would become the responsible stakeholder in globalization. Its selfish nationalisms lamented this, the exclusive care of its own interests. They wheedled the use of their limitless resources, even if they simultaneously warned about the enormous commercial assets. The financial crisis stripped the mask from rhetorical standings: by unanimous request, China needs to stop taking advantage of its dominant position in manufacturing and needed to start dealing with global affairs. Its history, dimensions, and its power cannot be limited to its national boundaries. If the world is flat, China needs to exit its isolation and take care of foreign affairs, because there is no solution to the financial crisis without communal participation. Now, Beijing is offering its resources to help growth, and make talent and money available for other countries. Obviously, it will do so pursuing its own interests, just like the US has done. It will make available the means to redeem all of Asia, while trying to capitalize on the strategic side. It was the same philosophy that inspired the birth of the WB, ADB, and other regional development banks. However, they’re being denied now, resorting to objections based on principle that don’t conceal their political worries. Instead, the US and its allies should concede the opening of a credit line with this move—multilateral for once and spearheaded by China. Monitoring rather than condemning would be more opportune, collaborating instead of competing. Instead, worries that will likely fade in time are gaining strength, legacy of a changing world. The interminable post-war period in the Pacific opposes this, and the well-paid bureaucracies of the WB and ADB. The dynamics of the relations between countries is in motion, and is faster than what people believe. The closing words of an editorial from The Guardian are valid as a summary: “This is a case for accommodation, not confrontation.”

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About Alberto

Alberto Forchielli, born in 1955, received an MBA with honors from Harvard Business School and a bachelor’s cum laude in Economics from the University of Bologna. He is a founding partner of Mandarin Capital Partners, and the founder and president of Osservatorio Asia, a non-profit research center focused on Asia. He is also the founder of T-Island, a consultancy agency specialized in international relocations for professionals. In addition, he guided the expansion of the Roland Berger Foundation to Italy, which provides individual support for talented students lacking means to further their educations.